Sometimes I feel like I live in economic Palestine. The bill we are talking about being gutted is H.R. 4173: Wall Street Reform and Consumer Protection Act of 2009.
Baseline Scenario has the latest on the attempts to thwart derivatives reform legislation. In How to Kill OTC Derivatives Reform in Two Sentences, it appears Barney Frank (notice the House Financial Services Committee Chair's name pops up over and over on attempts to thwart reform), along with yet another committee chair, Colin Peterson (D-MN), Chairman of the House Committee on Agriculture, have introduced an amendment...again (after the last one was ripped asunder by public outcry).
49) SWAP EXECUTION FACILITY.—The term ‘swap execution facility’ means a person or entity that facilitates the execution or trading of swaps between two persons through any means of interstate commerce, but which is not a designated contract market, including any electronic trade execution or voice brokerage facility.
SEC. 5h. SWAP EXECUTION FACILITIES.
(A) No person may operate a swap execution facility unless the facility is registered under this section.
(B) The term ‘swap execution facility’ means an entity that facilitates the execution of swaps between two persons through any means of interstate commerce but which is not a designated contract market.
(2) RULES FOR TRADING THROUGH THE FACILITY.—Not later than 1 year after the date of the enactment of the Derivative Markets transparency and Accountability Act of 2009, the Commission shall adopt rules to allow a swap to be traded through the facilities of a designated contract market or a swap execution facility. Such rules shall permit an intermediary, acting as principal or agent, to enter into or execute a swap, not withstanding section 2(k), if the swap is executed, reported, recorded, or confirmed in accordance with the rules of the designated contract market or swap execution facility.
The second sentence here allows an intermediary to execute a swap, ignoring the section 2(k) which is the meat of the reform, as long as the swap is recorded somewhere.
Now we already have, from above, that a swap execution facility can be something other than the exchange. This is a rule that guts the regulation right out the door, and for no apparent benefit to reform. Many of these alternative swap facilities will be owned by the banks, so it won’t necessarily force the price transparency that has been promised. To trust regulators to simply do the right thing is naive at best when the ability to follow fixed rules is available.
While Baseline Scenario tries to give Frank a break and claim he might not know this has snuck into the bill, they note the legislation is moving very quickly and should be wrapped up tomorrow.
That's what happens. Amendments move rapidly so people will not catch the modifications and the lobbyists amendments and demands in a quickly, at the last minute, gutted piece of legislation.
With that, to watchdog review the latest amendments, click here for the list. Folks, I frankly haven't gotten to this and as you can see from the obfuscation of the above, lobbyists are quite clever in how they gut bills. They have it down to an art.
So please click this link and review the other amendments. If you post a comment on what you find I'll update this post. Also note the flooding of amendments. This is another technique so the public must wade through volumes in order to discover the loopholes in a matter of a few hours.
My understanding of the most important (possible to pass) gutting amendments are:
Colin Peterson’s amendment on derivatives, here, the combined Frank/Peterson amendment, here. Kanjorski's amendment on exemptions from Sarbanes-Oxley, and this one on mortgage cramdowns.
Please help with the hunt or if you see other blog posts who have discovered something, post in a comment so I may update.
This is a group effort.